Prepare to be a better grid citizen: offshore wind needs to go beyond levelised cost
In the second in a series of ‘Beyond Integration’ blogs on renewables and the grid, Felicity Jones explores the maverick status of offshore wind in a future of distributed renewables—and argues that the industry needs to go beyond its focus on levelised cost.
Sometimes things are conspicuous by their absence.
Last month we launched Beyond Integration, a crystal-ball exercise consisting of a global survey and interviews on a high renewables future. Respondents painted a slick picture of the future characterized by storage and solar, prosumers and IT.
Meanwhile, offshore wind barely got a mention.
In fact, the sheer scale and physicality of offshore wind turbines, the world’s largest rotating machines, could hardly be more different to the distributed, modular and software-shaped future people tend to imagine. Offshore wind players are often those at the heart of the incumbent electricity regime—integrated utilities and oil & gas companies. Those involved in the new age of energy are more likely to come from Silicon Valley.
Yet despite this, our interview with DONG Energy revealed a positive message for offshore wind:
“There is a continued need for large renewables projects, even with a strong focus on distributed generation. The reality is that a diversity of supply is required—in terms of technology, and in terms of scale’.” – Brent Cheshire, UK Country Chairman, DONG Energy.
DONG has built one third of the world’s offshore wind capacity, with aspirations for future projects as large as 1 GW each and with load factors of 50-60%. DONG’s response provided a helpful sense of perspective. Yes, offshore wind bucks the trend in a high renewables world – but despite its maverick status, it is not displaced by solar and IT. Scale and technology diversity matter, building resilience and balancing the generation profiles of distributed technologies.
Beyond levelised cost
Yet innovation is still needed. With growing proportions of variable renewables on the grid, we’re moving from an era in which ‘generation is king’ to ‘grid is king’: offshore wind will need to adapt. And here, my conversation with DONG got really interesting:
‘Offshore wind has many of the right technical characteristics to deliver ancillary services, and we are in discussion with various grid companies about how to bring this forward’.
This discussion of ancillary services drives to the core of Dynamic 1 in our Beyond Integration report. In future, DNV GL believes that renewables—including offshore wind—risk being caught between the pressures of cost reduction, and the growing need for renewables to support grid reliability. To date, the primary metric facing the offshore wind industry has come firmly from the left of the diagram below: to be affordable, to minimize levelised cost. In future, we will need new economic metrics which better capture offshore wind’s contributions to system reliability, on the right of the diagram. Payments for ancillary services are a good example.
Of course, cost reduction is still required, and we can’t afford to stall the progress tracked in the UK’s offshore wind Cost Reduction Monitoring Framework. But cost is just one half of the profit formula: it’s time to start thinking more seriously about revenue.
Industry needs to prepare for a future in which the timing, and to some extent location, of offshore wind kWh generation matters more and more. Revenue will increasingly depend on the ability to be a ‘good grid citizen’, whether directly through ancillary services, or indirectly through increasing exposure to market prices.
In short, it’s ok for offshore wind to be a misfit in a world of distributed generation – but only if it can play its part in helping that new distributed system function smoothly. Simply expecting offshore wind generation to be ‘integrated’ into status quo electricity system arrangements won’t cut it. Slashing costs isn’t enough.
We need to prepare offshore wind to contribute more directly to grid reliability. We need to go beyond old metrics, beyond levelised cost: beyond integration.